Australian Vintage faced a challenging time in the UK and European markets as bulk wine sales fell, but it remained optimistic over branded sales and is looking to expand UK distribution.

Total wine sales in to the UK/Europe market fell by AU$5.6 million to AU$46 million, said the group, posting its half-yearly results to December 31, 2013.

Overall the group saw net profit increase to AU$4 million, compared to AU$3.3million last year for the same period. Earnings fell toAU $11.3 million from AU$11.9 million last year for the same period.

Total revenues fell 4% to AU$104.8 million due mainly to a fall in bulk wine sales to the UK and Europe and North America.

While the firm saw success in Australasia and North America through significant sale increases (11%) there of its McGuigan branded wines, the UK market did not perform so strongly.

The UK and Europe market was up only marginally, and the firm attributed the favourable exchange rates and continued focus on brands as driving the increase. The company said that reports have shown total UK wine consumption has declined by 7%, which combined with its high wine duty rates make trading challenging.

During the six months to December 2013, sales of McGuigan branded wines grew by 23% in Australia, but fell by 9% in the UK/Europe market. The firm said the UK/Europe market contributed AU$2.7 million compared to AU$2.8 million in the previous six months, as total wine sales were down by AU$5.6 million to AU$46 million to a "significant decrease in lower margin bulk wine sales and sales into Ireland" where high tax rates are impacting earnings.

However the group says its branded wines are still performing well in this market and it is looking to expand UK distribution.

According to statistics from the Australian Bureau of Statistics, the 2013 vintage, at 1.8 milllion tonnes, was larger than expected and more than the industry could sell. It also said that early indication are that the 2014 vintage will be "very challenging" thanks to severe frost last October and the current extreme heat in a number of regions., It said "both these factors will impact yield".

Overall the group remains optimistic and confident that its 2014 result will be "significantly better than last year and in line with market expectation".